Recently, Moody’s Investment Rating Agency claimed that El Salvador’s Bitcoin trading activity increased risk to the country. The same thing was voiced by most other groups who spoke out against the El Salvador experiment. However, President Nayib Bukele openly rejected their views.
Moody’s rating agency also discussed El Salvador’s Bitcoin -related risks in its conversation with Bloomberg on Wednesday. Analyst Jaime Reusche claims the increase in the country’s Bitcoin holdings adds to a risky portfolio, especially for governments that have faced liquidity issues before.
Since making it a legal tender last September, El Salvador has increased its role in the crypto market by increasing its holdings of Bitcoin at every opportunity available. Based on the president’s latest Twitter update, the country of El Salvador is estimated to hold 1391 Bitcoins currently worth about $ 58 million.
However, based on Moody’s assessment, since the country regularly buys, the value of its holdings has dropped by $ 10-20 million.
Reusche said, "If it is increasing, then that represents a greater risk to the repayment capacity and fiscal profile of producers."
The analyst said that the weakness of El Salvador's agreement with the International Monetary Fund (IMF) has further increased the "risk of default". Due to its price uncertainty, the IMF itself opposed the use of crypto assets as a legal tender last July.
Moody’s pessimistic attitude towards El Salvador’s debt is nothing new. Last July, the agency downgraded El Salvador's government debt to "Caal", reflecting "very high credit risk", due to "deterioration in the quality of policy -making".
Meanwhile, President Bukele also did not care about the agency’s valuation and remained fully focused on Bitcoin. In a recent tweet responding to Moody’s statement, he said that El Salvador is “DGAF”.
Bukele has shown indifference to other organizations. When the Bank of England expressed concern over the country’s Bitcoin use in November, he noted that their ‘concerns’ were dishonest.
